Christina Binkley on Las Vegas and the Gaming Industry

April 10th, 2008 at 8:00 am

CLR INTERVIEW:Christina Binkley is a columnist for the Wall Street Journal and spent ten years as their lead reporter covering Las Vegas. Her new book, Winner Takes All, recounts the phenomenal growth of Las Vegas and America’s gaming industry. Below is Christina’s interview with the California Literary Review.

As the subtitle of your book suggests, there are three major players in the Las Vegas casino industry. Would you give us an overview of their backgrounds and management style as well as their current holdings? Let’s start with Steve Wynn.

Steve Wynn is the showman of the group and the one who has built his fortune with charismatic leadership as well as gritty chutzpah. The spoiled eldest son of an East coast bingo operator, he’s an Ivy League college graduate and a passionate art collector. He has a wild temper that can swing from fury to humor at a moment’s notice. People who work closely with him find that he will flatter them fantastically one day, and brutally harangue them the next. I think that he is often unaware of how loud and mean he is perceived as being. Wynn is a substantial shareholder in the company he took public, Wynn Resorts, and owns homes in Las Vegas; Sun Valley, Idaho; and New York City.

How about Kirk Kerkorian?

Kirk Kerkorian, a generation older than Wynn, is the son of Armenian immigrants and was raised first in central California and later in Los Angeles, where he wound up in reform school—though he doesn’t seem to have been as troubled as today’s youths who end up in reform school. As a youth, he worked to help support his parents and siblings. He made is first fortune in aviation. The casino and movie businesses were his mid-life career and while casinos have made him richer and more famous, he manages them quietly and from afar as investments rather than getting involved in operations. His wealth is tied up in two entities, Tracinda Corp., which owns most of his various businesses, and the Lincy Foundation, his charitable enterprise.

Finally, Gary Loveman.

The youngest generation of the three, Gary Loveman never expected to be a mogul of any sort. He grew up in a blue collar Indiana family and married his high school sweetheart while pursuing a career in academics. As one of MIT’s top PhD candidates in economics, he accepted an offer to teach at Harvard Business School. It was a part-time consulting gig that led him to Harrah’s Entertainment, but his canny ideas about marketing to low-roller gamblers eventually earned him the top job at the company. A few mega-deals later, he’s richer than his wildest dreams (but not nearly as rich as Wynn and Kerkorian) and seated at the helm of the world’s largest gambling company.

Your book gives a fascinating insight into the data that’s collected on gamblers by Harrah’s and how it is used.

While Wynn and Kerkorian catered to high rollers, Harrah’s has long focused on low rollers. It’s not hard to know your best customers, keeping track of their birthdays and personal proclivities, but it’s very difficult to know enough about the multitude of low rollers to market to them effectively. Harrah’s took the scientific approach, studying gamblers the way Pavlov studied animal behavior. They tracked customers’ behavior in casinos, recording how fast they hit a slot machine button, how long they gamble, and so on—and noting how they respond to marketing offers such as free food, cash to gamble with, etc. After years of collecting this data, Harrah’s has created what some call a “secret recipe” of how to get gamblers to gamble more at Harrah’s casinos.

One of the depressing things about casinos is watching people gamble away money it doesn’t look like they can afford to lose. What are the moral implications of the casino industry using its insights into the behavior of gamblers to extract more and more money from them?

Casino executives like to make the free will argument—that most people have the ability to choose between gambling and walking out the door. The evidence suggests that this is true for most people. Unfortunately, it’s often the most vulnerable people that get taken advantage of—just as in the subprime mortgage industry—when highly sophisticated marketers focus their smarts on less advantaged people who are chasing a dream. Some casino executives are troubled by this—my book focuses on one of Harrah’s leading marketing executives, Rich Mirman, who became troubled by his own methods and innovations.

You mention in your book Steve Wynn’s “genius at social stratification.”

At Wynn Las Vegas, for instance, there is a special and very luxurious entrance for guests who pay, or are invited to stay in the “Tower Suites”—hotel rooms that are no larger or different than the rest of the hotel other than that they have this special entrance and more intimate front desk. The swimming pool for these suites is literally above and overlooking the pool for regular folk—so Tower Suite guests can look down on the hoi polloi. In fact, the whole resort has been designed to allow these patrons to move around in their own private sphere. This allows the Wynn to cater to celebrities, business leaders and others who generally have avoided Las Vegas in the past for its lack of intimate luxurious offerings. By catering so skillfully to these folks as well as the masses who keep his slot machines going, Wynn manages to have his cake and eat it too.

At one time Vegas marketed itself as a family resort. That seems to have gone by the wayside. How does Vegas see itself now?

Vegas is proudly Sin City once again. The family-resort episode was revealed as a mistake within months of the openings of a series of family friendly casinos like the MGM Grand and Treasure Island and Excalibur. The problem for Las Vegas, though, is that it was stuck with those casinos long after. The MGM Grand has demolished its Oz theme, though, and Treasure Island has renovated away the last of its child-friendly attractions.

It’s hard to imagine Las Vegas building more elaborate and expensive casinos and continuing to make money, but I guess the pessimists have always been proved wrong. How do you see things playing out over say, the next ten years in Las Vegas and also throughout the United States?

There’s no way the planned 40,000 new hotel rooms will be built there—yet. The current economy will force developers to slow down their plans in the near term. But in the next ten years, we’ll see far bigger and more sophisticated resorts opening than are operating today—with more retail, entertainment and restaurants. CityCenter is the first of these new style resorts, which are really more like cities, with condos and interconnected hotels, retail districts and entertainment zones. Harrah’s, which has plans for something similar yet potentially bigger, is exploring how to use communications technology like texting to encourage resort guests to remain within the Harrah’s sphere rather than migrating to rival properties.

Because of the cash generated from gambling, Las Vegas is in the forefront of the vast new world of retail and commerce—what we’ll see there in 10 years, we’ll see elsewhere in 15—not just in terms of casinos, but also in shopping malls and theme parks.

We’ll also see more regional and Native-American-owned casinos opening up around the country, and more power concentrated in the hands of the wealthy Indian tribes who own some of them.

In Bethlehem, Pennsylvania they’re building a casino where the huge Bethlehem Steel plant used to operate. To me, it’s symbolic of a country that once produced items of value to the world, now gambling away its wealth.

Bingo! To coin a hackneyed phrase. I agree that it’s symbolic of a country that once produced items of value, but is now creating entertainment that offers little of value other than diversion, and it’s produced by employees who are paid far more poorly than their predecessors in manufacturing.